Unlike bulk orders worth thousands or hundreds of thousands of dollars, drop ship orders are problematic in terms of managing your cost components well enough for a product to be profitable, especially when it’s retail price is less than $40 or $50.
A lot of operating costs can severely impact your profitability: The manufacturing of the product, warehousing, EDI costs associated with communicating with your Trading Partner, order processing handling by staff, pick, packing and shipping by the warehouse, and the technology investments needed like an ERP or simple inventory and accounting system, shipment scheduling / tracking tools, etc.
To complicate things, drop shipping is becoming a preferred business model for many traditional brick and mortar retailers, in addition to the many e-tailers that have already shaped the e-commerce market over the last few years. For suppliers, this will mean an exponential increase in small orders to process, shorter and shorter acknowledgement and shipment deadlines and more and more staff to keep up with the load. And, of course, there’s the retailer commissions charged for allowing you to sell on their marketplace. All of which impact profitability on drop ship orders even more.
So, what can you manage? Well, from a retailer perspective, there’s not much you can do other than ensure that they are complying with your Minimum Advertised Price (MAP) Policy to protect your margins and brand. And I’m sure that you have already and are continuing to reduce costs in your supply chain, and have probably optimized your warehouse operations and / or negotiated the best cost possible with your 3PL.
So what’s left? EDI charges and order processing costs! These alone are commonly more than $5 per order! That’s at least a 10% margin loss on a small order.
Depending on your drop ship order volume this $5+ cost can be reduced to $1 or significantly less with OPAL. That’s a $4 gain per order without even trying.
If you are doing a great deal of drop shipping to customers and are struggling with the cost of EDI when doing business, please take 15 minutes of your time to view a demonstration of OPAL so that we may answer your questions and see how it can solve the problems you are encountering and improve efficiency and profitability.
OPAL is an autonomous, cloud based order processing and fulfillment solution and works 24 hours a day, 7 days per week, even when there’s no one in the office. It works with and enhances your ERP investment and automates drop ship orders – processing them in less than 8 seconds – and prepares all of the necessary information, packing slips and shipping labels necessary for a warehouse or 3PL to pick pack and ship the order. It even tracks the order and notifies you when there’s a shipment issue. All without any EDI costs or additional software tools.